10/06/2009

Supreme Court Refuses Royalty Exemptions Case

Yesterday, the Supreme Court refused to hear a case which could have struck down enormous royalty exemptions currently held by the oil and gas industry. This is an unfortunate decision on the part of the high court and one that the current administration estimates will cost taxpayers at least $19 billion.

The case in question centers on a law passed in 1995 that exempted oil and natural gas producers from paying royalties until they had produced a specific amount of their product. This law was passed at a time when energy prices were extremely low and was designed with the express purpose of encouraging exploration. During the years 1996-2000, the leases in question were acquired by a company that would later by bought by Andarko Petroleum Corp. When energy prices spiked to nearly unprecedented levels, the Department of the Interior determined that the exemption was no longer necessary and wanted to see it revoked, citing the $19 billion that it would cost taxpayers. The 5th U.S. Circuit Court of Appeals, based in New Orleans, ruled against the government and in favor of Andarko. Today's refusal to hear the case upholds the circuit court's decision.

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